THE PESO slipped against the dollar on Thursday ahead of the release of key US economic data that could affect the Federal Reserve’s policy decision next month.

The local unit closed at P56.283 per dollar on Thursday, down by less than a centavo from its near five-month high finish of P56.281 on Tuesday, Bankers Association of the Philippines data showed.

The foreign exchange market was closed on Wednesday as the government suspended work and classes due to inclement weather in the capital.

The peso opened Thursday’s session slightly stronger than its Tuesday finish at P56.25 per dollar. Its weakest showing was at P56.34, while it climbed to as high as P56.22 versus the greenback.

Dollars traded inched down to $1.567 billion from $1.587 billion on Tuesday.

The peso “traded mostly sideways on cautious trading due to the release of gross domestic product (GDP) data later,” a trader said in a phone call.

“The peso marginally corrected higher ahead of the latest US GDP data on Aug. 29 and the personal consumption expenditure (PCE) inflation, which is the preferred inflation metric of the Fed,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The second estimate for second-quarter US GDP data was set to be released overnight. US GDP grew by 2.8% last quarter, based on the advance estimate released in July, picking up from the 1.4% expansion in the first quarter.

Meanwhile, July US PCE price index data will be released on Aug. 30 (Friday).

Investor bets for imminent US rate cuts were further cemented by Fed Chair Jerome H. Powell’s remarks at Jackson Hole last week that the “time has come” to cut rates, joining a chorus of Fed policy makers, Reuters reported.

Some analysts said that the dollar reaction to Mr. Powell was overdone as, while his explicit rate cut guidance had some significance, investors had already fully priced in around 100 basis points (bps) of monetary easing well before Jackson Hole.

Markets have fully priced in a 25-bp rate cut from the Fed next month, with a 34.5% chance of an outsized 50-bp reduction, according to the CME FedWatch tool.

The dollar index was last 0.28% higher at 101.29, having fallen to a 13-month low of 100.51 on Tuesday.

For Friday, the trader expects the peso to move between P56.10 and P56.50 per dollar, while Mr. Ricafort sees it ranging from P56.20 to P56.40. — Luisa Maria Jacinta C. Jocson with Reuters